USD/JPY extends slide to December lows near 108.50

• US Dollar Index slumps below 96.50 ahead of American session.
• 10-year US Treasury bond yield pares early gains.
• CB Consumer Confidence Index coming up next from US.

After breaking below its two-week-old range and dropping below the 109 handle on Monday, the USD/JPY pair continued to stretch lower on Tuesday and touched its lowest level since early December at 108.50. As of writing, the pair was down 0.26% on the day at 108.55.

Geopolitics and USD's poor performance weigh on USD/JPY

The persistent selling pressure surrounding the greenback since Christmas seems to be dragging the pair lower. The US Dollar Index closed the previous week 0.68% lower and is already down 0.6% since the start of this week. As of writing, the index was at its lowest level since the first week of July at 96.44.

In addition to the USD weakness, heightened geopolitical tensions in the Middle East force investors to seek refuge in safer assets such as the JPY. Commenting on the latest developments following the US airstrikes in Syria and Iraq, "Iran is orchestrating an attack on the US embassy in Iraq," US President Donald Trump tweeted out. "They will be held fully responsible. In addition, we expect Iraq to use its forces to protect the Embassy."

Reflecting the souring market mood, the 10-year US Treasury bond yield erased a large portion of its daily gains and was last up only 0.4% on the day.

Later in the session, the Conference Board will release the latest Consumer Confidence Index data of the year. 

Technical levels to watch for